Receiving Wide Coverage ...
Highway Bill Win for Small Banks: Bipartisan discussions in Congress have generated a $300 billion bill to address highway funding and shortfalls in the Federal Highway Trust Fund. Talks on how to pay for the bill had focused in large part on the Fed — in particular cuts to its dividends to banks and its rainy-day fund, moves that were opposed by the banking industry. Small banks have reason to celebrate however, as they escaped cuts to their Fed dividends, the New York Times reports. The bill now only affects dividend payments to large commercial banks, reducing the dividends to 1.5% from 6%. It also shrinks the size of the rainy-day fund. While small banks certainly benefited, it's the Export-Import Bank that likely won the most, the Wall Street Journal notes. The export-financing institution had more or less stopped operations when its charter ended in July. This legislation officially reopened the bank, following a previous bill that passed in October to renew its charter. For more on the highway bill, head over to American Banker and check out our coverage of the legislation.
RBC Court Case Throws M&A for Loop: A legal loss for Royal Bank of Canada has left the M&A industry worried about the greater risk that now exists in advising deals. The Supreme Court of Delaware ruled RBC owed $76 million plus interest to shareholders of Rural/Metro, an ambulance company that sold itself to private equity firm Warburg Pincus under the Canadian bank's guidance. The court said RBC failed to get Rural/Metro's board the best deal possible, in part because it was concurrently advising the seller while collecting financing fees from the buyer, the Financial Times writes. The deal is a blow to M&A banking, which was largely considered less risky since the financial institutions advising could count on coming out ahead. Now, it could matter how successful the transaction is for buyers and sellers — the court ignored RBC's argument that Rural/Metro ultimately went bust. Consequently, M&A banking could begin to see an exodus. RBC also became the third major Canadian bank to report earnings exceeding analyst expectations, the Wall Street Journal reports. The company's profits rose by a record 11% year-over-year to roughly $1.94 billion during the fourth quarter.
Wall Street Journal
Shareholders ramped up the pressure on Morgan Stanley to cut costs, which led to the job cuts in the bank's fixed-income division announced Monday. Sources told the paper that institutional investors, including firms like Moore Capital Management and Epoch Investment Partners had questioned Morgan Stanley execs' strategy in one-on-one and group discussions since late October. The investors were peeved that slowdowns in the volatile fixed-income market had not been met with cost cuts from Morgan Stanley. Since the third quarter's results became public though, the paper notes no additional meetings have been requested — a sign perhaps the bank has relented.
JPMorgan Chase has entered into a new venture with online lender OnDeck Capital, which will see the megabank's entry into online lending. Through the deal, Chase will use OnDeck's platform to offer its small-business customers loans of up to $250,000. The platform will also employ Chase's branding. Observers told the paper the deal will help Chase break out of the rut big banks find themselves in when it comes to disbursing smaller loans to businesses. To learn more about the deal with OnDeck, check out American Banker's coverage of the announcement.
New York Times
Republican presidential nominees have once again dredged up a relic of the past: the gold standard. Sen. Ted Cruz, R-Texas, commented recently the "dollar should have a fixed value in gold," and his rivals have also suggested considering a return to the gold standard. The arguments stem from Republican concerns the Fed has lost control of inflation in its attempts to boost economic growth. But as the paper notes, historians have said that gold standard-bearers ignore the costs associated with the reduced flexibility such an arrangement would pose. Plus, gold itself is not the stable commodity many think it is — its price fluctuates just like the value of any good and demand has ebbed as more has been mined. Whether additional candidates will throw their full weight behind the idea though remains to be seen.
A former child actor and ex-Citigroup executive will head to jail after allegedly accepting thousands of dollars in bribes. John Cassisi, whose brief acting career as a child included playing the role of Fat Sam in 'Bugsy Malone,' will serve two to six years in state prison after pleading guilty to money laundering and receiving commercial bribes. Cassisi will also forfeit $500,000 as part of the deal. The former actor has served as the director of global construction for Citi Realty Services, which manages the bank's offices and branches. During his tenure, he allegedly accepted bribes from construction firms — ranging from envelopes of cash to hunting trips in Alaska to construction on his Long Island home — in exchange for a chance at a contract to work on renovations to Citi's future Tribeca headquarters.
CNBC: In a commentary, analyst Richard Bove argues banks made a major mistake in not attempting to explain how they conducted business to the public during the financial crisis. He argues the lack of explanation allowed the banking industry to be "effectively nationalized," through the addition of new regulation. For instance, banks arguably have given U.S. regulators carte blanche for more stringent stress tests, even though the government itself has not made a strong case for why the tests need to be more difficult or why banks need more capital.